The aerospace sector, one of the largest and most powerful industries in the United States, supplies five markets: military aircraft, missiles, space, commercial airliners and general aviation. The U.S. aerospace sector is considered the largest in the world and is the main supplier of both military and civil aerospace hardware to the rest of the world. This sector directly employs about 500,000 workers in scientific and technical jobs, and supports more than 700,000 jobs in related fields. Because of the great emphasis on research and development, about 25% of those who work in aerospace are engineers, scientists and technicians. Aviation is one of the fastest-growing industries in the United States, and it has increased yearly at the rate of at least 14%.

The aerospace industry's product line is broad because its primary products, flight vehicles, require up to millions of individual parts. In addition, many support systems are needed to operate and maintain the vehicles. In terms of sales, military aircraft have the largest market share, followed by space systems, civil aircraft and missiles. According to a recent study by the U.S. Department of Commerce, aerospace exports directly and indirectly support more jobs than the export of any other commodity. In 2012, the U.S. aerospace industry contributed $118.5 billion in export sales to the U.S. economy.

In 1958, the National Aeronautics and Space Administration succeeded the National Advisory Committee for Aeronautics and initiated the Mercury manned space program. In 1959, the U.S. Aircraft Industries Association, which was formed in 1919 to promote American civil aviation, changed its name to the Aerospace Industries Association. U.S. aerospace industry interests are represented through the AIA, an aerospace-industry-funded organization that provides a forum for technical and policy issues, and whose membership consists of the major companies in the field. In 2000, America's largest aerospace companies, ranked in terms of total revenue, were Boeing, Lockheed Martin, United Technologies, Honeywell, Raytheon and Textron. Among the leading companies in the American corporate aircraft market are Raytheon, Cessna and Gulfstream, which is part of General Dynamics.

The aerospace sector's origin in the United States dates back to December 1903, when Wilbur and Orville Wright demonstrated an airplane capable of powered, sustained flight. In 1908 the Wrights secured a contract from the U.S. Army to make a single aircraft, and also licensed their patents to allow the Astra Company to manufacture aircraft in France. Glenn Curtiss of New York began selling his own aircraft in 1909, prompting many American aircraft hobbyists to turn entrepreneurial.

Air and space travel have become entrenched in daily life. Federal programs and recent or pending legislation are in place to ensure the future of the aerospace industry in the United States. This legislation includes the 2010 National Space Policy, which is intended to give U.S. commercial space companies the opportunity to provide new services to the government such as cargo transportation to the International Space Station as well as human transport for exploration.

  1. What are common risks associated with investing in the aerospace sector?

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  2. What are the best mutual funds for investing in the aerospace sector?

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  3. What other sectors are most highly correlated with the aerospace sector?

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  4. What are the most popular ETFs that track the aerospace sector?

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  5. What metrics are most appropriate to evaluate companies in the aerospace sector?

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  6. How does government regulation impact the aerospace sector?

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